SW’s sales rise 18.8% in first nine

12.07.05

Sherwin-Williams’ consolidated net sales for the third quarter and nine months ended September 30 rose 17.9% to $2.0 billion and 18.8% to $5.5 billion, respectively, as compared to the same periods one year ago.
The gains in the quarter and nine months were due primarily to strong sales performances by stores open for more than 12 months, acquisitions and improvements in the automotive finishes and international coatings segments, the company said. Acquisitions, including Duron and Paint Sundry Brands, added $102.1 million, or 6.1%, to net sales in the third quarter and $367.1 million, or 8.0%, to net sales in nine months.
Net sales in the paint stores segment rose 22.2% to $1.4 billion in the quarter and 23.9% to $3.7 billion in nine months. Sherwin-Williams attributed the growth primarily to strong domestic architectural paint sales to contractor customers, increased sales to DIY customers and improved industrial maintenance and product finishes sales. The acquisition of Duron added approximately 6.6% to this segment’s net sales in the quarter and nine percent in the nine-month period. Net sales from stores open for more than 12 calendar months rose 14% in the quarter and 13.2% in the nine months over last year. The paint stores segment’s operating profit rose 9.8% to $185.1 million in the quarter and 23.5% to $450 million in nine months.
Net sales of the consumer segment rose 4.5% in the third quarter to $361.2 million and increased 6.8% in the nine-month period to $1.1 billion. Sherwin-Williams said Paint Sundry Brands added approximately eight percent to net sales in the quarter and approximately 9.1% for the nine-months. This segment was hit by escalating raw material prices, as operating profit fell 2.6% to $53 million in the quarter and 2.6% to $169 million in nine months.
Net sales in the automotive finishes segment rose 11.3% in the quarter to $145.5 million and 9.5% in the nine-month period to $419 million, fueled by increased paint sales volume, selling price increases and the impact of favorable currency exchange rates. According to Sherwin-Williams, favorable currency exchange rates increased sales by 3.8% in the quarter and 2.8% in nine months. Operating profit dropped $5.2 million to $9.6 million in the quarter and was nearly flat at $42.1 million for the nine months, impacted by a loss of $7.9 million in the third quarter resulting from the disposition of its majority interest in a joint venture in China.
Net sales in the international coatings segment rose 25.9% to $101.5 million in the quarter and 22.8% to $286.2 million in nine months. Increases in U.S. dollars were due primarily to increased sales in local currencies of 9.9% in the quarter and 11.1% in nine months, which were enhanced by the impact of favorable currency exchange rates. The sales increases in local currencies were due primarily to volume gains and selling price increases in South America. The segment operating profit was $8.4 million, up from $4.5 million in the third quarter last year. For the nine months operating profit was $15.7 million, up from $10.5 million one year ago.
Commenting on the third quarter and nine months results, Christopher M. Connor, chairman, president and CEO, said, “We are pleased that in 2005 we have been able to achieve higher net sales based in large part on volume gains and apparent market share gains. However, we are amazed by the continuing rapid escalation in raw material costs. Unfortunately, these cost increases continue to put downward pressure on our gross margins. Though we are maintaining tight control over expenses, we have no other alternative than to implement certain price increases.”
Connor added that the firm is encouraged by the “strong sales increases across all product categories in our paint stores segment which helped mitigate much of the significant escalating raw material cost increases,” but is “concerned about the sluggish paint sales in the consumer segment, the sales softness at some of that segment’s retail customers and the negative impact on margins of raw material costs that need to be recovered through price increases.”

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